Visiting a centre in Greater Manchester which specialises in getting people off welfare and into work, he said the country needed to regain the sense that claiming benefits you were not entitled to was "morally wrong".
Earlier he announced an "uncompromising" crackdown on benefit cheats which will be unveiled in the autumn.
He said reducing the £5.2 billion annual cost of fraud and error would be the "first and deepest" cut in public spending and that credit rating agencies could be recruited to help identify false claims.
Mr Cameron dropped into St Peter's Partnership in Ashton-under-Lyne, a community-focused charity, which provides information and advice to people wanting to get back into work and find training and work placements.
He reinforced the message that benefit fraud was "wrong" and "should stop".
He said: "There are some people who are claiming welfare who are not entitled to it and that is just wrong and that should stop.
"As a country as we start to make savings to get our budget deficit under control the first cut we ought to make is the welfare payments to people who are not entitled to it.
"The system pays money inappropriately to people who are not entitled to it so we have got to make the system work better as well. Both things, fraud and error, go together and I want to cut them both."
On the involvement of third-party assistance, he said: "I do not think people should be concerned.
"If you are entitled to welfare and can claim it then you should claim it but if you are not entitled to it you should not get and should not claim it.
"Private companies use all sorts of different means to make sure they are not defrauded, why should the state be any different?
"In the end it's taxpayers' money. People going out to work hard every day do not pay their taxes so that someone can basically claim it fraudulently.
"That is not right, it is not fair and I want to stop it."
He added: "In the end, government can only do so much. We also need parents bringing up their children properly, we need citizens behaving responsibly and we need people taking responsibility for themselves for a sense that it is morally wrong to claim money you are not entitled to.
"We need that sense back in our national life as we grapple with this deficit and try to build a more responsible society."
St Peter's Partnerships, based in the St Peter's ward, was originally set up in 1998 by residents who wanted to tackle such issues as community safety, housing, fly tipping and anti-social behaviour.
It later became a registered charity and now brings people together to promote a range of community initiatives which target the underlying long-term difficulties facing the ward.
Four activity and learning centres deliver IT training courses, skills training and job support.
Its Greenscape landscaping and gardening service employs 12 staff and takes on 24 trainees each year from within the community to prepare them for working for life.
It carries out work for Tameside Council and local businesses and schools.
Chris Hilton, 21, from Stalybridge, is five weeks into his training with Greenscape and hopes to find employment eventually.
He said: "It's going well and good to be doing something worthwhile while I look for a job. I'm still looking for something more stable."
Praising the work of St Peter's, Mr Cameron said: "This is a really great social enterprise that helps to get people off welfare and into work.
"I was chatting to one of the guys here who had been out of work for 10 years. Now you imagine you have been out of work for that long, how much confidence and self-esteem you lose. To get someone like that off welfare and into work is a magical thing and to come and hear what this organisation does and how well it has done is impressive.
"It is part of the 'big society' that I want us to build in this country."
Writing in the Manchester Evening News today, the Prime Minister said tougher penalties, more prosecutions, measures to encourage others to shop cheats and greater efforts to recover "stolen" payments would also be included in the autumn reforms.
He said that welfare and tax credit fraud and error costs the taxpayer £5.2 billion a year - the cost of more than 200 secondary schools or more than 150,000 nurses.
He said a simplified benefits system being developed by Work and Pensions Secretary Iain Duncan Smith would help reduce the £1.6 billion annual bill for administrative errors.
Mr Cameron will later talk to voters in Manchester at the latest PM Direct session.
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